The Housing Price Decline in Helsinki Will Last Until the End of 2023
October 06, 2022
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Commenting Juhana Brotherus, chief economist of the Mortgage Society of Finland (Hypo).
Housing prices in Helsinki have started to decline after rgrowing for several years in a row. Statistics Finland has published preliminary data indicating that prices for old housing in housing companies decreased by 1.6% year-on-year in August. Home buyers paid an average of €5,520 per square meter for their homes.
Regions. Housing prices in other parts of the metropolitan area continued to creep up. Espoo and Kauniainen recorded an annual increase of 1.9% to €4,176 per square meter, Vantaa — by 2.4% to €3,212 per square meter. However, in Espoo and Kauniainen, house prices fell by 1.8% between July and August.
Quote. Juhana Brotherus, chief economist at the Mortgage Society of Finland (Hypo), says the drop in prices is not surprising in light of the sharp decline in consumer confidence and rising interest rates. Since the Finnish capital has the largest number of real estate investors, this is the first area in which fluctuations in the economic situation are observed.
"People buying their own house react slowly. When the economic outlook changes, people don't immediately start putting their homes up for sale. Investors react faster," he said.
The increase in interest rates is another factor that strongly affects Helsinki, as the growth most affects residents of expensive areas.
"If you have a loan for hundreds of thousands, an increase in interest rates by several percent is a significant cost. If you have a loan for tens of thousands, a few percent is not so much," he explains.
Prices in Helsinki, he added, are also falling due to the high pace of housing construction, which is expected to continue next year.
Brotherus recalled that a long-term decline in housing prices could contribute to a recession, prompting mortgage borrowers to cut costs. While the continuation of the current trend may force some to sell their homes at a loss, many should be able to resort to the buffers that formed as housing prices rose during the coronavirus pandemic.
"Prices would have to fall significantly — we would have to talk about ten percent — to be at the same level as in 2019."
Forecast. The expert predicts that the downward trend in housing prices will continue until the end of the year, but unless something unexpected happens, this will not be enough to negate the growth observed during the seven months of the year.
"I think the decline in housing prices will continue throughout the year. We will be closer to 2024 before we see a clear turn for the better," he said, adding that the possibility of a serious recession and a sharp drop in prices cannot be completely ruled out.
"The risks are currently exceptionally high in the housing market across the country, including the metropolitan region," he added.
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